| What some people might not know is that Federal | | | | more private lenders will probably reduce the amount |
| Student Loan process was dramatically changed by | | | | of loans offered to students since they no longer |
| the new healthcare legislation. I'm not sure why, | | | | have a guarantee of payment by the government. |
| Congress decided to include the changes to loans | | | | These new laws also expand the grants that go to |
| within the healthcare legislation. But that's what they | | | | lower income students. Currently, students who |
| chose to do and is one of the reasons why many | | | | qualify for federal grants can obtain up to a |
| are concerned about the health care legislation | | | | maximum of $5,300 per year. But with these new |
| beyond just the health care issues. | | | | laws they will be able to qualify for up to $6,000 per |
| But the good news is most of the changes to the | | | | school year. |
| student loan process are to the student's benefit. | | | | The two existing loan programs for students consists |
| Student loans have always been quite a challenge for | | | | of one that is offered directly from the government |
| anyone not familiar with all the ins and outs of the | | | | and the other is offered through the private lenders, |
| federal and private lender rules. These new laws that | | | | which is called the Federal Family Education Loan |
| go into effect are meant to simplify and make it | | | | Program and is subsidized by the federal government |
| easier for students to both qualify for the loans and | | | | with a guarantee payback. The Federal Family |
| ease the payment terms for the students. | | | | Education Loan Program will end as of the first of |
| These new processes are also responsible for some | | | | July this year. |
| of the planned monies available to reduce the federal | | | | Additional funding is also included in these new laws |
| budget deficit. Based on current projections, the | | | | for community colleges to offer more affordable |
| proposed $10 billion in savings from these new | | | | retraining for unemployed people. Given our current |
| processes will be directly applied to reduce the | | | | high unemployment rates this is probably one of the |
| federal budget deficit. Another very subjective area, | | | | best features under these new student loan changes. |
| who knows if these savings will materialize. | | | | The banks and Sallie Mae are very unhappy with this |
| The major changes have to do with both repayment | | | | new change in loan rules. Sallie Mae has stated that |
| of the loans, and even the amounts that the | | | | this change will force them to reduce their workforce |
| students will have to pay back. Currently, students | | | | from about 8600 people now to less than 6000 after |
| don't have to pay back more than 15% of their | | | | these changes take effect. This is a net loss of over |
| incomes each month on any student loans. There is a | | | | 2500 jobs. Sallie Mae is one of the largest private |
| cap on the number of months, or in this case years, | | | | student loan providers. |
| that the students will have to pay back on any loans | | | | It's hard to say how much of an impact that these |
| and is currently set at 25 years. In this new change | | | | new changes will have on private lenders and the |
| to the rules the monthly maximal amount of income | | | | student borrowers. It is safe to say that the student |
| is 10% rather than the 15% and the maximum | | | | loan private lenders will be less motivated to offer |
| number of years a student will have to pay on the | | | | student loans with higher risk. If the government |
| loan is 25 and will be 20 under this new law. | | | | picks up the slack and provides these loans at a |
| One of the reasons this new process saves the | | | | lower rate and offers easier repayment terms of |
| government money is the fact that the government | | | | student borrowers will benefit. |
| will no longer subsidize the private lenders by | | | | I would highly recommend that anyone who is |
| guaranteeing the payback. In other words, if the | | | | considering applying for student loan make sure that |
| student defaults on the loan now guaranteed by the | | | | they understand exactly what the terms are in any |
| government, the government will pay the loan back | | | | loan agreement regardless of these new changes. |
| to the private lender. But in this new set of laws the | | | | And from any lender, to include the Federal |
| government will no longer guarantee payback so | | | | Government. |